Wynn Gets The Nod To Build A $1.6 Billion Casino Resort Outside Boston

Wynn Resorts (NASDAQ:WYNN) has won the bid to build a casino resort just outside Boston. The company will build a $1.6 billion resort, which is expected to open in late 2017. ^[1] Massachusetts Gaming Commission (MGC) picked Wynn over Mohegan Sun primarily due to better paying jobs and Wynn’s plan to clean up the former industrial land at the development site. ^[2] This is the third gaming license issued by the MGC. Earlier, it approved an MGM Resorts (NYSE:MGM) casino in Springfield, and a Penn National Gaming slots parlor near the Rhode Island border.

This is good news for Wynn, which has been waiting for years to build a casino resort in Everett. Massachusetts is an important location as it is the third richest state in the U.S. with a per capita income that is $7,588 higher than the average U.S. per capita income. ^[3] Since spending on casinos depends on the disposable income of individuals, the resort will attract gamers and tourists from all parts of Massachusetts. Boston is the largest city in Massachusetts and it is well connected with other major cities in the state and region.  Wynn will generate more than $800 million in revenue and close to $250 million in annual EBITDA from this resort, according to our estimates.

See our complete analysis of Wynn Resorts’ stock here

Wynn’s Bet On Everett

Wynn plans to develop an integrated casino resort at the 37-acre site on the Mystic River. The resort will comprise of a 500 luxury-room hotel, 140,000 square feet of retail space, eight restaurants, a 12,000 square feet nightclub, a five star spa, 150 table games and 3,000 slot machines.  And it will be operational by late 2017. ^[4]

Wynn currently owns more than 4,700 rooms and 1,900 slot machines at the Las Vegas Strip. ^[5] It appears to be a good move for the company to expand elsewhere in the U.S. The Las Vegas Strip currently accounts for majority of gaming revenues in the U.S. for all major casino operators. However, slow economic growth, the legalization of gaming in other U.S. states, and the strong growth of Macau’s gaming industry have adversely affected Las Vegas’ gaming industry. Recently, even Macau is facing headwinds amid Chinese government’s crackdown on corruption, impact of which is already visible on the VIP gaming (See – Weekly Casino Notes: Stock Prices Correct After Third Consecutive Monthly Decline In Macau Gaming Revenues). If this trend continues, the Boston resort can help Wynn offset some of the troubles faced in Macau. Wynn expanding its operations outside the Las Vegas Strip will also help revive its growth in the U.S.

We believe that Boston casino will help the company diversify its assets in the U.S.  The company will also benefit from the rise in domestic operations driven by higher consumer spending in the U.S.   Consumer spending is on a rise and has moved from approximately $10,300 billion in July 2011 to over $10,900 billion in January 2014. ^[6] While Wynn will benefit from the casino operations in the region, the new resort will also be a large source of non-gaming revenues driven by the hotels, retail, food & beverage, entertainment and other activities—a trend seen in other casino properties in the U.S.

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1. Wynn Resorts Accepts Massachusetts Gaming License Award Designation, Wynn Resorts Press Release, Sep 17, 2014 [↩]
2. Wynn Resorts Wins Bidding on $1.6 Billion Casino Outside Boston, The Wall Street Journal, Sep 16, 2014 [↩]
3. Massachusetts Per Capita Income, Department of Numbers [↩]
4. Wynn Everett’s Blog [↩]
5. Wynn Resorts’ SEC Filings [↩]
6. United States Consumer Spending, Trading Economics [↩]